The abiding metaphor for property is ‘bricks and mortar’, so data on their availability is as good a barometer as any on the relative fortunes of real estate, especially housebuilding. Judging by the latest, it looks like bricks are in shorter supply than, supposedly, turkeys for Christmas.
The stats, from the Department for Business, Energy & Industrial Strategy, show that in September, total stocks of bricks were down 20% year on year to 269 million and were 45% below the recent peak, in March 2020, just before Covid enforced a shutdown of almost all production across the UK.
Bricks are among many shortages – blamed variously on Brexit, Covid or a lack of truck drivers – having an impact on the wider property market. First it was timber, then steel and, more recently, washing machines. More on that later, but for economists or historians, the ebb and flow in brick use describes a similar narrative on housing cycles as twisting rock seams to geologists or Roman coins to archaeologists. Time Team-like, I dug out records tracking brick production, deliveries and stocks back to 1949.
The latest stocks are much lower than the 547 million they hit back in the mid-noughties bubble, inflated by easy credit and a lot of dodgy off-plan buy-to-let speculation (which I then called ‘lie-to-bet’). New investment pushed up production – inevitably, just in time for the global financial crisis later in the decade, largely fanned by reckless lending on both sides of the Atlantic.
The last time stock levels were lower was in September 1988 when they hit 204 million at the peak of the post-Big Bang building boom, fuelled by a surge in home ownership in the wake of Margaret Thatcher’s ‘right to buy’, allowing council tenants to purchase their homes.
I remember it well as a young trade journalist on Building magazine. Swathes of Thameside developments were clad in yellow Danish bricks because you couldn’t get British ones for love nor money. Reportedly, a gang were nicked after reversing into a wall and loading the bricks on to the dumper.
Then chancellor Nigel Lawson killed off the housing market for another eight years or so. In his March 1988 Budget, he halved mortgage interest tax relief for couples but – disastrously – gave prospective buyers until August to exchange contracts, triggering a short-lived feeding frenzy. The ensuing housing crash resulted in inventory levels surging to 1.6 billion in 1992, necessitating a cull of industry production capacity.
Delving further back, stockpiles got down to 140 million in 1972 when the Saudis quadrupled the price of oil, plunging the world into recession. It fell to 80 million in October 1964, as a young Lawrie Barratt and others revolutionised mass housebuilding. But the all-time post-war low was 71 million in August 1953, as the nation rebuilt to the nascent strains of rock ’n’ roll. Then, stock levels represented less than a week’s worth of industry production. By comparison, it is now 7.2 weeks, just over half the 10-year average.
So, how are housebuilders reacting to the latest shortages? Size, while not everything, appears to be important. In their latest stock market updates, Barratt, Taylor Wimpey and other top-10 groups reported that despite supply chain challenges, their building programmes were up to speed. As for cost increases (one suggested 10% to 15% for bricks, much more for timber and other materials), house price inflation and some no doubt hard negotiations with suppliers were maintaining margins at what are close to historical highs.
Material costs account for about a quarter of selling prices, so margins can hold, unless labour and land costs also go up.
Whether or not mid-sized developers possess the same clout with suppliers is questionable, but they face myriad constraints relative to the big guns, not least accessing land, finding labour and negotiating the planning labyrinth.
There are signs – including in the latest Chartered Institute of Purchasing Managers survey, backed up by anecdote – of delivery times if not reducing, then getting worse more slowly. New brick production capacity is poised to come on stream and bottlenecks in imports of other materials are easing.
Thanks to the stamp duty holiday, last winter there wasn’t the usual lull in demand from housebuilders. An extended Christmas break this year might allow brick companies to replenish stocks. Unlike turkeys, that will be something most housebuilders – especially smaller ones – will be voting for.
Alastair Stewart is an equities analyst and consultant